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MNCs, Rents, and Corruption: Evidence from China

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  • Boliang Zhu

Abstract

How does multinational corporation (MNC) activity affect corruption in developing countries? The existing literature tends to suggest that economic integration helps reduce corruption, as it increases market competition and efficiency and promotes the diffusion of good governance. In this article, I argue that such a generalization oversimplifies the consequences of MNC activity in host countries. The entry and presence of MNCs may contribute to rent creation in developing countries, thereby leading to a high level of corruption. To test this argument, I conduct a case study on China and draw from original data of filed corruption cases to construct measures of corruption. I find that provinces with more MNC activity are strongly associated with more corruption. The results are robust and consistent when possible endogeneity, law enforcement, and alternative measures of corruption are considered. This finding has important implications for domestic governance in developing countries.

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  • Boliang Zhu, 2017. "MNCs, Rents, and Corruption: Evidence from China," American Journal of Political Science, John Wiley & Sons, vol. 61(1), pages 84-99, January.
    • Handle: RePEc:wly:amposc:v:61:y:2017:i:1:p:84-99
    DOI: 10.1111/ajps.12259
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    Cited by:

    1. Toke S. Aidt & Facundo Albornoz & Esther Hauk, 2019. "Foreign in influence and domestic policy: A survey," Cambridge Working Papers in Economics 1928, Faculty of Economics, University of Cambridge.
    2. Manasseh Charles O. & Nwakoby Ifeoma C. & Okanya Ogochukwu C. & Ifediora Chuka U. & Nzidee Williams A., 2023. "The Impact of Foreign Direct Investment and Oil Revenue on Economic Growth in Nigeria," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(3), pages 61-85, September.
    3. Arif, Asma & An, Pengli & Qi, Yajie & Li, Huajiao & An, Haizhong & Hussain, Mujahid & Wang, Yanli, 2021. "The influence factors of the national roles in the FDI network: A combined methods of complex networks and Panel Data Analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 563(C).
    4. Yongzheng Liu & Guangliang Ye, 2019. "Competition Policy and Trade Barriers: Empirical Evidence from China," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(2), pages 193-219, March.
    5. Julian Donaubauer & Peter Kannen & Frauke Steglich, 2022. "Foreign Direct Investment & Petty Corruption in Sub-Saharan Africa: An Empirical Analysis at the Local Level," Journal of Development Studies, Taylor & Francis Journals, vol. 58(1), pages 76-95, January.
    6. Yating Pan & Zhan Shu & Zhipeng Ye, 2023. "Exploring the dynamics of corruption perceptions in sustained anti-corruption campaigns: a survey experiment in China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-9, December.
    7. Jiang, Junyan & Zhang, Muyang, 2020. "Friends with benefits: Patronage networks and distributive politics in China," Journal of Public Economics, Elsevier, vol. 184(C).
    8. Bahoo, Salman & Alon, Ilan & Paltrinieri, Andrea, 2020. "Corruption in international business: A review and research agenda," International Business Review, Elsevier, vol. 29(4).
    9. Toke S. Aidt & Facundo Albornoz & Esther Hauk, 2021. "Foreign Influence and Domestic Policy," Journal of Economic Literature, American Economic Association, vol. 59(2), pages 426-487, June.
    10. Shisong Jiang & Yijie Min, 2023. "The Ability and Willingness of Family Firms to Bribe: A Socioemotional Wealth Perspective," Journal of Business Ethics, Springer, vol. 184(1), pages 237-254, April.
    11. Malik, Ashish & Froese, Fabian Jintae, 2022. "Corruption as a perverse Innovation: The dark side of digitalization and corruption in international business," Journal of Business Research, Elsevier, vol. 145(C), pages 682-693.
    12. Yang, Yujeong, 2022. "Bring Your Own Workers: Chinese OFDI, Chinese overseas workers, and collective labor rights in Africa," World Development, Elsevier, vol. 152(C).
    13. Donaubauer, Julian & Kannen, Peter & Steglich, Frauke, 2018. "Foreign direct investment & corruption in Sub-Saharan Africa: An empirical analysis at the local level," Kiel Working Papers 2118, Kiel Institute for the World Economy (IfW Kiel).
    14. Huanming Wang & Xiaoyun Sun & Yu Shi, 2024. "Commercial investment in public–private partnerships: the impact of government characteristics," Local Government Studies, Taylor & Francis Journals, vol. 50(1), pages 230-260, January.
    15. Chen, Ling, 2017. "Grounded Globalization: Foreign Capital and Local Bureaucrats in China’s Economic Transformation," World Development, Elsevier, vol. 98(C), pages 381-399.
    16. Pei Sun & Jonathan P. Doh & Tazeeb Rajwani & Donald Siegel, 2021. "Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1818-1853, December.
    17. Yang, Jie & Mohammad, Shoeb, 2023. "Is the cure worse than the disease? The effect of emerging market MNEs on host country corruption," International Business Review, Elsevier, vol. 32(3).
    18. Bunte, Jonas B. & Desai, Harsh & Gbala, Kanio & Parks, Bradley & Runfola, Daniel Miller, 2018. "Natural resource sector FDI, government policy, and economic growth: Quasi-experimental evidence from Liberia," World Development, Elsevier, vol. 107(C), pages 151-162.
    19. Tian Lan & Ying-yi Hong, 2017. "Norm, gender, and bribe-giving: Insights from a behavioral game," PLOS ONE, Public Library of Science, vol. 12(12), pages 1-21, December.
    20. Krifa-Schneider, Hadjila & Matei, Iuliana & Sattar, Abdul, 2022. "FDI, corruption and financial development around the world: A panel non-linear approach," Economic Modelling, Elsevier, vol. 110(C).
    21. Cuervo-Cazurra, Alvaro & Dieleman, Marleen & Hirsch, Paul & Rodrigues, Suzana B. & Zyglidopoulos, Stelios, 2021. "Multinationals’ misbehavior," Journal of World Business, Elsevier, vol. 56(5).
    22. Chunyang Pan & William X. Wei & Etayankara Muralidharan & Jia Liao & Bernadette Andreosso-O’Callaghan, 2020. "Does China’s Outward Direct Investment Improve the Institutional Quality of the Belt and Road Countries?," Sustainability, MDPI, vol. 12(1), pages 1-21, January.
    23. Wang, Huanming & Ma, Liang, 2019. "Ownership, corruption, and revenue regimes for infrastructure partnerships: Evidence from China," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    24. Wei Jiang & Daokang Luo & Liwen W.L. Wang & Kevin Zheng Zhou, 2024. "Foreign ownership and bribery in Chinese listed firms: An institutional perspective," Post-Print hal-04432029, HAL.
    25. Imtiaz Arif & Lubna Khan & Sundus Waqar, 2023. "Does Corruption Sand or Grease the Wheels? A Case of BRICS Countries," Global Business Review, International Management Institute, vol. 24(6), pages 1468-1481, December.

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